Bank of America reported its highest quarterly net interest income in at least a decade as the lender reaps the benefits of the Federal Reserve’s interest-rate hikes, and debt traders beat analysts’ estimates.
Net interest income (NII), a key source of revenue for the bank, rose 24 per cent to $13.8 billion (€14.1 billion) in the third quarter on higher rates and loan growth. Analysts had expected a roughly 23 per cent increase for NII, the revenue the bank collects from loan payments minus what it pays depositors. Higher loan revenue combined with an increase in trading revenue helped earnings beat analysts’ expectations.
“We continued to see strong organic client growth across our businesses, with increased client activity helping to drive revenue up by 8 per cent, chief executive Brian Moynihan said in a statement Monday. “Our US consumer clients remained resilient with strong, although slower growing, spending levels and still maintained elevated deposit amounts.
The results offer another look at how Wall Street fared through a choppy quarter marked by consumer strength, capital-markets weakness and a gloomy economic outlook. Last week, JPMorgan Chase, Morgan Stanley, Citigroup and Wells Fargo all posted gains in net interest income, with some raising their NII forecasts for the rest of the year.
Shares of Bank of America rose 4.6 per cent to $33.16 in early New York trading. They have fallen 26 per cent this year, compared with a 23 per cent decline for the KBW Bank Index.
The bank’s traders beat estimates, with bond-trading revenue rising 27 per cent to $2.55 billion and equity trading down 4 per cent to $1.54 billion.
Investment-banking revenue fell 46 per cent, better than the 47 per cent drop analysts were expecting, as the same market tumult that drove trading up also led to muted deal making. Fees for advising on mergers and acquisitions declined 34 per cent, and revenue from equity and debt issuance dropped 76 per cent and 34 per cent, respectively.
Despite the slowdown, the bank isn’t planning any job reductions in its investment-banking division. — Bloomberg
